South Dakota LLC for Attorneys at Law

Limited Liability Company – General – South Dakota

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In South Dakota, a limited liability company may be organized for any lawful purpose, subject to any law of South Dakota governing or regulating business, including regulation of professional service firms. There are specific statutory provisions which are applicable to a corporation or limited liability company organized to engage in the practice of law. In the statutory provisions, the terms used have the following meanings:

(1) “Articles of incorporation,” includes the articles of organization of a limited liability company;

(2) “Corporation” means both corporations under the South Dakota Business Corporations Act and limited liability companies under the South Dakota Limited Liability Company Act;

(3) “Director” or “officer” includes any manager of a limited liability company or the members of a limited liability company that does not have managers;

(4) “Shareholders” includes the members of a limited liability company;

(5) “Shares” or “stock” includes membership interests in a limited liability company.

The articles of incorporation of such corporations must contain provisions complying with the following requirements:

(1) The name of a corporation must contain the words “professional company” or “professional corporation” or abbreviations thereof, such as “Prof. Co.,” or “Prof. Corp.” or “P.C.” The name of a limited liability company must contain the words “professional limited liability company” or the abbreviation “Prof. L.L.C.” In addition, the name of the corporation must always meet the ethical standards established for the names of law firms by the Rules of Professional Conduct of the Supreme Court of South Dakota as if all of the stockholders of the corporation were partners.
(2) The corporation must be organized solely for the purpose of conducting the practice of law only through persons qualified to practice law in South Dakota.
(3) The corporation may exercise the powers and privileges conferred upon corporations by the laws of the State of South Dakota only in furtherance of and subject to its corporate purpose.
(4) All shareholders of the corporation must be persons duly licensed by the Supreme Court of the South Dakota to practice law in South Dakota, and who at all times own their shares in their own right. They must be individuals who, except for illness, accident, time spent in the armed services, on vacations, and on leaves of absence not to exceed one year, are actively engaged in the practice of law in the offices of the corporation.
(5) Provisions must be made requiring any shareholder who ceases to be eligible to be a shareholder to dispose of all his shares forthwith either to the corporation or to a person licensed to practice law in South Dakota.
(6) The president must be a shareholder and a director, and to the extent possible all other directors and officers must be persons licensed to practice law in South Dakota. Lay directors and officers must not exercise any authority whatsoever over professional matters.
(7) The articles of incorporation must provide and all shareholders of the corporation must agree (a) that all shareholders of the corporation are jointly and severally liable for all acts, errors and omissions of the employees of the corporation, or (b) that all shareholders of the corporation are jointly and severally liable for all acts, errors and omissions of the employees of the corporation except during periods of time when the corporation maintains in good standing a lawyers’ professional liability insurance which must meet the following minimum standards:

(a) The insurance must insure the corporation against liability imposed upon the corporation by law for damages resulting from any claim made against the corporation arising out of the performance of professional services for others by attorneys employed by the corporation in their capacities as lawyers;
(b) The policy must insure the corporation against liability imposed upon it by law for damages arising out of the acts, errors and omissions of all nonprofessional employees;
(c) The insurance must be in an amount for each claim of at least fifty thousand dollars multiplied by the number of attorneys employed by the corporation. The policy may provide for an aggregate top limit of liability per year for all claims of one hundred fifty thousand dollars also multiplied by the number of attorneys employed by the corporation. No firm is required to carry insurance in excess of three hundred thousand dollars for each claim with an aggregate top limit of liability for all claims during the year of nine hundred thousand dollars;
(d) The policy may provide that it does not apply to (i) any dishonest, fraudulent, criminal or malicious act or omission of the insured corporation or any stockholder or employee; (ii) the conduct of any business enterprise (as distinguished from the practice of law) in which the insured corporation is not permitted to engage but which nevertheless may be owned by the insured corporation or in which the insured corporation may be a partner or which may be controlled, operated or managed by the insured corporation in its own or in a fiduciary capacity, including the ownership, maintenance or use of any property; (iii) bodily injury to, or sickness, disease or death of any person, or to injury to or destruction of any tangible personal property, including the loss of use; and, (iv) may contain reasonable provisions with respect to policy period, territory, claims, conditions and other usual matters.

A certified copy of the articles of incorporation must be filed with the clerk of the Supreme Court of South Dakota, together with a certified copy of all amendments to the articles. When this is filed, the corporation must file with the clerk a written list of shareholders setting forth the names and addresses of each and a written list containing the names and addresses of all persons who are not shareholders who are employed by the corporation and who are authorized to practice law in South Dakota.

The corporation must do nothing which if done by an attorney employed by it would violate the standards of professional conduct established for attorneys, including rules of court. The corporation must at all times comply with the standards of professional conduct established by.

Nothing in the statutory provisions applicable to professional corporations and limited liability companies diminishes or changes the obligation of each attorney employed by the corporation to conduct his practice in accordance with the standards of professional conduct promulgated by the state bar of South Dakota or by the Supreme Court of South Dakota. Any attorney who by act or omission causes the corporation to act or fail to act in a way which violates such standards of professional conduct, including any provision of this rule, is deemed personally responsible for the act or omission and is subject to discipline.

Practicing law as a corporation or limited liability company does not modify the attorney-client privilege established by the Legislature and any comparable common law privilege.

A professional service corporation may adopt a pension, profit-sharing (whether cash or deferred), health and accident, insurance or welfare plan for all or part of its employees including lay employees, providing that such plan does not require or result in the sharing of specific or identifiable fees with lay employees and any payments made to lay employees or into any such plan in behalf of lay employees are based upon their compensation or length of service, or both, rather than the amount of fees or income received.

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